I love siting down to prepare monthly thoughts for my financial planning clients in Adelaide.  We might be the 6% state but we have the world’s best Reds – Shiraz, Cabernet or a bit of both – take your pick.  The point is that I may have opened a bottle of Barossa’s finest to help lubricate my typing digits.

Cash Rate Unchanged

OK this is old news and the cash rate remains at 3.50% with variable mortgage rates around the 6% mark for ‘Pro Pack’ loans for medical professionals, lawyers and accountants.  The good news for first home buyers is that they will qualify for these discounts regardless of their profession owing to their loan sizes.

In addition, the banks have started promoting their Spring Mortgage Rates discounts in a grab for market share on their fixed rates.  One Lender came out with a 2 year fixed rate under their pro-pack at 5.59% and more will follow.

I have observed that if one bank has the best 2 year rate another will have the best 3 year rate and so on.  The branch staff can then parrot that they have the best rate in the market.

Have a look at http://www.financewise.net.au/2012/08/to-fix-or-not-to-fix/ for my thoughts on fixing – this is especially relevant for first home buyers.

Most economists agree that rates will be steady for 12 months and then will increase except for the HSBC Chief Economist who is predicting an additional 0.25% reduction.

Building Approvals

The ABS said that Australian residential approvals surged a seasonally adjusted 27.3% in May following a 7.6% decline in the previous month that was mainly due to temporary disruptions in Western Australia.  This was driven by a surge in high rise approvals.  Sorry about this first home buyers in Adelaide but this news won’t help you.

Greece

The news remains worrying in Athens. Greek gross domestic product (GDP) will shrink 4.7% this year after contracting 6.9% in 2011, the European Commission said last month.

‘Greece’s jobless rate soared to 22.6% in the first quarter of 2012 from 20.7 % in the previous quarter as economic activity slumped’ (Reuters, 2012).  The country’s government wants to use the alarming statistics as leverage to get its lenders to ease up on austerity conditions such as the timing of spending cuts and tax hikes.

Is it time to flee Dimitri?  Keep pushing the IMF and Greece may not have a choice.

America

Do we need to care what’s going on in the US?  Manufacturing shrinks, Confidence stinks and the unemployment rate slinks at 8.2%.  The two big issues are War in Iran and the Election and these issues are more closely linked than we think so don’t blink we are on the brink.

China

There is no immediate rebound predicted for the world’s second biggest economy.  The problem here is that Europe’s Credit card is maxed out and the US can barely afford the necessities let alone the luxuries.

However, the RBA remains robust in its outlook for South East Asia and hence the outlook for our mining industry ought to remain positive.

Standard definition of flood regulations finalised

And not before time.  The laws requiring all insurance companies to use the same definition for ‘flood’ have been enacted as part of the Government’s pledge to simplify flood insurance, following recent natural disasters.

The regulations provide a standard definition of ‘flood’ for home building and home contents; small business; and strata title insurance contracts. The regulations include the word ‘flood’ to be used in these insurance contracts to mean:

The covering of normally dry land by water that has escaped or been released from the normal confines of:

Any lake, or any river, creek or other natural watercourse, whether or not altered or modified; or Any reservoir, canal, or dam.

This has had an impact on premiums which continue to rise.